Larking Gowen weekly digest – latest news on direct/indirect tax, financial reporting and more…
1. Profits from developing UK land: HMRC have now released guidance to the legislation introduced by FA 2016, which altered existing anti-avoidance rules for transactions in land. The change to legislation primarily affects companies and individuals trading or dealing in the development of UK land. The guidance clarifies HMRC's view on the scope of the legislation and should be considered for all transactions which involve land/property development.
2. Self-assessment January tax payments: HMRC have not sent blank SA payslips or reminders to taxpayers who did not file returns by a cut-off date in December. Details of how to pay and payslips that can be printed can be found on the Gov.uk/HMRC website. The telephone number for taxpayers who wish to pay over the phone is 0300 200 3402 (HMRC do not publicise this on their website).
3. Tax relief on accrued payments included in R & D claims: According to the report of a recent tax case, R & D relief is only available on amounts paid in the year to which the claim relates and not on accrued amounts. Despite this ruling, it is confirmed in the same report that HMRC will continue their practice of allowing amounts accrued to be included in a claim for R & D relief as long as actual payment has been made by the time the claim is submitted to HMRC.
VAT and indirect taxes
1. Caravans & removable contents: As you will be aware, when a business sells a zero or reduced rated building that meets the VAT definition of a caravan, it must apportion its supply to account for the standard rated removable contents included within the van. Cottingham Park Lodges Ltd proposed a seemingly aggressive method of apportionment, which HMRC did not deem fair and reasonable. The First Tier Tribunal (FTT) ruled in favour of the company, agreeing that it was free not to attribute any mark-up to the caravan and contents; the company's business model was such that all profit lay in the licence granted over the land. This resulted in significant VAT savings for the company. Caravan parks making similar supplies should review their business model to see if similar opportunities exist.
In a separate issue, the company also contested that the sale of a plot supplied to a tenant who would pitch their own caravan should follow the zero/reduced liability of the caravan. The tribunal dismissed this argument, ruling that the pitch fee remains standard rated.
2. VAT on Energy Saving Materials: In the recent FTT case of Wetheralds Construction Ltd, the taxpayer appealed against HMRC's decision to treat conservatory insulation as standard rated. The taxpayer's work involved the fitting of insulating tiles to the exterior of existing conservatory structures.
HMRC argued that the supply was that of a new roof, which should be standard rated. The Tribunal found that the primary purpose of the work was to provide insulation and install a new roof. The taxpayer's appeal was allowed, and therefore the supplies could be treated as reduced rated energy saving materials.
1. Spring Budget 2017 will be made on Wednesday 8 March 2017.
Whilst every effort is made to ensure accuracy, information contained in this publication may not be comprehensive and recipients should not act solely on the basis of this information.